Crude Prices Edge Lower as Middle East Tensions Cool

Oil futures eased in thin trading Monday, as a truce between Israel and Hamas held up through the weekend, helping to defuse fears over a broader conflict and potential supply disruptions.

Light, sweet crude for January delivery settled 54 cents, or 0.6% lower, at $87.74 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange recently traded 59 cents, or 0.5%, lower at $110.79 a barrel.

Futures gave back some of the previous week's gains as last week's ceasefire between Israel and Hamas appeared to largely calm the outbreak of violence in Gaza. Reports emerged of sporadic gunfire in the territory, but the lack of more serious violence appears to have calmed fears over a broader war that would drag in Israel's neighbors or potentially disrupt oil supplies.

Crude prices had gained nearly 2% last week in the wake of the flare-up between Israel and its Palestinian neighbors. Neither Israel nor Gaza are important players in the oil market, but the fighting stoked fears that the conflict could drag in neighbors such as Egypt or Syria, or prompt a supply response from the Organization of Petroleum Exporting Countries.

Either outcome appears unlikely for now, even as a separate crisis in Egypt has resulted in fresh protests there. Egypt's President Mohamed Morsi was set to meet with senior judges Monday, seeking to defuse the crisis prompted by his declaration of new powers.

Meanwhile, last week's ceasefire between Israel and Hamas has largely quieted fears of an immediate conflict, leaving oil traders to contemplate other geopolitical hot-spots such as Iran, and broader markets such as equities.

Stocks were set to settle lower Monday, after Thanksgiving-weekend sales growth came up a bit short of last year's levels. Oil prices often follow broader markets like stocks, which oil traders turn to for cues on broader economic sentiment.

Monday looked on track to be one of the thinnest days for Nymex trading volumes all year, as many traders remained on the sidelines following last week's Thanksgiving Day holiday in the U.S.

Carl Larry, president of Oil Outlooks and Opinions, said others remained wary of laying new trades so late in the year. "You're just not getting a lot of interest as you get to the end of the month," he said.

Front-month December reformulated gasoline blendstock, or RBOB, settled 1.76 cents, or 0.6%, lower at $2.7263 a gallon. December heating oil settled 3.06 cents, or 1%, lower at $3.0465 a gallon.